Private historically Black colleges and universities (HBCUs) have far fewer resources than non-HBCUs in overseeing endowment portfolios—placing limitations on how HBCUs can use their endowment, manage risk, and make asset allocation decisions, a report from the United Negro College Fund (UNCF), and PGIM, the global asset management business of Prudential Financial, finds.

Based on an online survey and a focus group of endowment professionals from private HBCUs, the report, Investing in Change: A Call to Action for Strengthening Private HBCU Endowments, (23 pages, PDF), explores challenges faced by HBCUs tied to the lack of funding and the comparably small size of their endowments. According to the report, small HBCU endowments limit infrastructure and capabilities, as 86 percent of survey respondents indicated their endowment was used predominantly to fund scholarships, with little budget left to support other essential needs. In addition, private HBCUs on average have only one internal investment management professional, often as part of a broader role, compared to an average of six internal investment staff at non-HBCUs.

The report also found that HBCUs are substantially more risk-averse than non-HBCUs, as 63 percent of HBCU respondents classify their risk tolerance as moderate, with the remainder preferring a more conservative approach. Only 13 percent of private HBCUs have specific resources allocated to risk management activities, significantly lower than the 54 percent of non-HBCUs that do. Moreover, HBCUs are less likely to allocate to alternative asset classes than non-HBCUs; on average, private HBCUs are holding about 27 percent less of their portfolio in alternative asset classes compared to non-HBCUs (14 percent vs. 41 percent).

The study also details ways in which the asset management industry can assist HBCUs with these challenges, including investor education and access to innovative investments and diversification solutions, sharing risk management expertise, providing portfolio management oversight, and supporting endowment pooling initiatives, with 44 percent of private HBCUs indicating interest in endowment pooling.

“HBCUs have, for centuries, pursued their missions without the endowment resources afforded to their counterparts. They have done tremendous work with a hand tied behind their back,” said Ed Smith-Lewis, UNCF vice president for strategic partnerships and institutional programs. “Using this study as a foundation, UNCF is leading the charge to forge a new era in which HBCUs are able to cultivate the endowments required to accelerate their work and impact.”

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